A citizen wearing a breathing mask to avoid heat drives on the road in China, May 23, 2019. Electricity loads in China’s Henan province hit a new record on Monday, driven largely by demand for air conditioning as scorching heatwaves spread across regions north of the Yangtze River.
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According to the chief economist at Hang Seng Bank China, China is currently in the grip of a devastating heatwave that could severely impact its economy.
The heatwave “is a pretty dire situation,” Dan Wang told CNBC’s Squawk Box Asia on Thursday, adding that it could likely continue for the next “slightly two to three months.”
China faces record-breaking heatwaves and grapples with a Yangtze River power outage. Extreme temperatures have disrupted crop growth and threatened livestock.
“It’s going to affect these big energy-intensive industries and it will have [a] Impact on the entire economy and even on the global supply chain,” she said.
“We are already seeing a slowdown in production in the steel industry, in the chemical industry, in the fertilizer industry. These are very important things when it comes to construction, agriculture and also manufacturing in general,” Wang added.
Most areas of the Yangtze River basin have been experiencing extremely high temperatures since July, according to a state media report. According to data from the Ministry of Water Resources, rainfall in the area decreased by about 45% compared to the average in recent years.
The report also quoted Liu Weiping, vice minister of water resources, as saying on Wednesday that the reservoirs in the middle and lower reaches of the Yangtze River have replenished 5.3 billion cubic meters of water since August.
The recent heatwaves and blackouts are reminiscent of last year’s major power outage that affected many of China’s major manufacturing hubs, such as Guangdong, Zhejiang and Jiangsu.
“Last year, power shortages led to China’s GDP growth of about 0.6%, according to our estimates,” Wang said. “We think that number will be much higher this year … I would say 1.5 percentage points lower.”
“Right now we’re giving 4% of GDP growth for the full year. If the current situation continues, I have to say that the growth rate is likely to be lower [3%],” she added.